Misleading Terms Lloyd's Panel Auditors: "Despite their title, the panel auditors were not in fact charged with carrying out an audit [of a syndicate's underwriting] at all. Their duty was described by Lord Cromer: 'The main function of the auditor is to provide a certificate to the Committee of Lloyd's that the Name [emphasis added] has sufficient funds at Lloyd's to meet his obligations.'" ('A View of the Room', by Ian Hay Davison, CEO of Lloyd's 1982-1985, p. 53) Lloyd's submits the total of these certifications of the Names' funds yearly to the British Department of Trade and Industry. On that basis, the Dept. of Trade and Industry certifies Lloyd's solvency to do business for the coming year. Audit: "Agents, underwriters, Names. . . were all under the misapprehension that the work done by the panel auditors [on syndicate accounts] was an audit, in the commonly accepted sense of that word: an independent opinion on the veracity of a set of accounts. But it was not [emphasis added] . . .

The accounts of an underwriting syndicate, and the determination of its profits, depend upon how much reserve is necessary to close the accounts. The figure for this closing reserve is provided by the underwriter in the form of the ["premium" for] reinsurance to close. . . [The "auditors"] did not consider it part of their duty to audit the reinsurance to close, yet the result of the syndicate for the year of account was wholly dependent on this one figure." ('A View of the Room', by Ian Hay Davison, CEO of Lloyd's 1982-1985, pp. 53-54) The "result of the syndicate for the year" was its profit or loss. In theory, the "closing reserve", aka the "premium" paid for the "reinsurance to close" provides the reinsuring successor syndicate reserves with which to meet its liability to pay claims against the closing syndicate's underwriting (see "Reinsurance to Close", below). The managing agent determining the appropriate closing reserve was operating under ever-present pressure to show his Names a profit each year.

Failure to audit that figure meant there was no safeguard at all against the agent's natural temptation to fudge the next year's reserves in favor of this year's profits. Auditor: "They were not charged with performing an audit to normal auditing standards, and although they clearly had knowledge of some of the matters that were going on. . . they did not see it as their duty to draw the Names' attention to what was happening." ('A View of the Room', by Ian Hay Davison, CEO of Lloyd's 1982-1985,, p. 54) The syndicate accounts consisted of Names' funds at Lloyd's, and premiums paid by policyholders to those Names who were their underwriters. The panel auditors were employed by "Lloyd's". Absent the duty to perform up to normal auditing standards, however, the auditors felt little or no obligation (duty of care) to report "up to standard" either. The Names-- and policyholders too-- were left in the dark. Byelaw: Before the Lloyd's Act 1982: A specific provision of the charter that governed how the Society of Lloyd's operated.

A byelaw could only be amended by a majority vote of the Names in attendance at Lloyd's annual meeting. After the Lloyd's Act 1982: A change in the contractual rights of the Names' underwriting agreement with Lloyd's, unilaterally enacted by the Council of Lloyd's. Insured by Lloyd's: The entity known as Lloyd's does not underwrite insurance policies. Voluntary associations of members of Lloyd's, called syndicates, the affairs of which associations are managed by agencies approved by Lloyd's, do the underwriting. Thus, the public relations hype about the "chain of security" behind a "Lloyd's" policy notwithstanding, the organization called Lloyd's itself has no liability whatsoever to pay claims against any insurance policy written by any syndicate. All Lloyd's contributes to the much-vaunted "chain of security" is their contractual authority to demand that other people (Names) pay obligations Lloyd's ruling Council deems appropriate.

(In other words: The only thing Lloyd's contributes is supposed control over "other people's money".) Lloyd's American Trust Deed: This document appoints Citibank New York, NY, as the trustee of Lloyd's American Trust Fund, and then relieves Citibank of so many of the duties of a trustee that Citibank's only remaining responsibility is to run the Lloyd's American Trust Fund as a checking account for Lloyd's dollar-denominated business world-wide. Lloyd's American Trust Fund: These are the deposits, consisting of premiums paid for dollar-denominated insurance policies, at Citibank out of which Lloyd's arbitrarily writes checks to pay claims and other obligations owed to policyholders and Names. Despite specious representations made by Lloyd's to the media and to courts, the money is not an "asset" of Lloyd's. The trust money belongs either to Lloyd's policyholders, to pay claims, or Names, as profits if premiums collected exceed claims paid. Lloyd's Trustee: A person who has agreed to maintain the appearance of, but has by trust deed agreed not to actually perform as, the fiduciary of Lloyd's policyholders and Names.

Long Tail: The liability for a current-year syndicate at Lloyd's to pay claims against policies written by syndicates that operated and closed in prior years. A current Lloyd's "syndicate-year" (see below) assumed these liabilities by "reinsuring to close" its predecessor, which had reinsured its predecessor, which had reinsured its predecessor, which had done the same, all the way back to the first year the syndicate began operations. This tail of old obligations assumed by the current "year" of a longstanding syndicate could, and in some cases did, stretch back 50 years and more. Member's Agent: An agent, chosen by Lloyd's, to manage the business and financial affairs at Lloyd's of those individuals who become members of Lloyd's. In actuality, a members' agent was an agent of Lloyd's, since these agents were ultimately subject to Lloyd's determination of what was in the best interests of said members. The layer of bureaucracy at Lloyd's known as members' agents was originated in 1971, coincident with the time when non-UK subjects and women were permitted to become Names at Lloyd's.

Name: "Name" is the vernacular or slang term for a member of the Society of Lloyd's. See "Underwriting Member", below. Ponzi Scheme: A term coined in the early 20th century to denote what was already standard business practice at Lloyd's: i.e. using newly invested money to pay obligations generated by those who had invested at some point in the past. Reinsurance to Close: " The accounts of an underwriting syndicate, and the determination of its profits, depend upon how much reserve is necessary to close the accounts. The figure for this closing reserve is provided by the underwriter in the form of the reinsurance to close." [Emphasis added] ('A View of the Room', Ian Hay Davison, p. 53) Lloyd's "reinsurance to close" is thus not really reinsurance at all. It is in fact the transfer of the entire portfolio, or "book of business", of a closing Lloyd's syndicate to one of its two open successor syndicates. The "premium" received by the successor syndicate is in fact the reserves to pay future claims against the liabilities it has assumed for all policies written by its predecessor.

Those "policies written" include the closing syndicate's "reinsurance to close" its own predecessor. That predecessor in turn had "reinsured to close" the preceding syndicate, and so on, back to the first year the syndicate name and number was originated by a managing agency. Often, 50 years or more of liabilities were accumulated via this process. Runoff policy: A "runoff policy" is the precise equivalent of "reinsurance to close", except that it is an inter-syndicate instead of intra-syndicate transaction. For a "premium" paid, a syndicate run by one managing agency assumes some or all liability on the past policies underwritten by a closing syndicate run by another agency. Again: this includes the closing syndicate's liabilities that were accumulated by its predecessor syndicate year(s) of account. These "old" liabilities were still "alive" and susceptible to claims due to the reinsurance to close process. The overseeing of Lloyd's insurance market by Lloyd's Committee and then Council. Oversight (Webster): a careless mistake or omission; the act of overlooking something.

"Several" liability: In theory, each Lloyd's Name is "several" in the legal sense of that term-- i.e., severed from any and every one else. The Name is supposedly not liable for anyone else's share of any underwriting risk or liability. "Reinsurance to close", however, makes a joke of this concept. The Name's share in a syndicate's "reinsurance to close" its predecessor in fact makes that Name liable to pay his pro rata share of any losses currently generated by any and all past underwriting by his "underwriting ancestors" in previous syndicate-years of account. All of these liabilities are included in the portfolio transferred to a syndicate via reinsurance to close! Lloyd's creation of a central fund to cover losses that current Names may be incapable of paying also exposes a Name to liabilities incurred by his contemporaries, but to a far lesser extent-- unless you remember to include his contemporaries' exposure under their "reinsurances to close". By virtue of the latter example, a Name was actually jointly and severally liable for excessive losses occurring anywhere in the constellation of Lloyd's syndicates both past and present.

Sole Trader: The supposed "several liability" of the Name is used by Lloyd's as justification for calling Names "sole traders", underwriting only on their own behalf. This was essential to Lloyd's recruitment efforts, and as problems developed has been central to Lloyd's legal defenses. Syndicate: A Lloyd's syndicate is not a legal entity. A syndicate has a manager and is designated by a name and number assigned to an amount of premium that may be written in a given year by an "active underwriter" of a particular managing agency for a particular temporary association or grouping of Names. The syndicate manager publishes a list of the subscribing "Names" and what pro rata share of policies the various Names have agreed to "underwrite". Each Lloyd's syndicate is technically "in business" for one year, but then remains "open" two more years for claims to develop, and finally closes at the end of the third year, by "purchasing reinsurance to close" from its succeeding year of account or from another syndicate.

Syndicate-year: The calendar year during which a Lloyd's managing agent actively writes new business for a particular association of Names, usually designated by the agency name, number, and the calendar year, such as: "Outhwaite 317, (of) 1981." An "underwriting member" is a person, commonly called a "Name", who has: a) been accepted as a "member of Lloyd's" b) committed themselves to unlimited liability to pay their pro rata share of claims against insurance policies written by the Lloyd's syndicates on which they agree to participate; c) placed a portion of their assets irrevocably under Lloyd's control, and given Lloyd's legal access to the rest of their assets; d) delegated the authority to conduct all of their business at Lloyd's, including power of attorney to further delegate that authority, to: i) a member's agent, who has delegated the active conduct of their business at Lloyd's to ii) managing agents that operate syndicates at Lloyd's; and who may iii) delegate that power to any other person, including Lloyd's personnel or ruling Council; and the Name has furthermore a) agreed that those Lloyd's agents, but not they themselves, have

 the sole authority to demand an accounting of their business and funds at Lloyd's; b) subjected themselves to Lloyd's ruling Council's power to unilaterally and even retroactively change the terms of their contractual relationship; c) agreed to act as a passive investor in any and all other regards besides; and d) is nonetheless identified by Lloyd's as an "underwriter".

Lloyds of London - Exploring London as a Global Financial Center - UIowa Wiki Exploring London as a Global Financial Center History of Lloyd's of London The Beginning The market began in Edward Lloyd's coffeehouse around 1688 in Tower Street, London. The opening of Lloyds coincides with both the sudden rise in popularity of coffee drinking in England and the increasing demand for marine insurance. His establishment was a popular place for sailors, merchants, and ship-owners whom Lloyd catered to with reliable shipping news. The shipping industry community utilized this place as a way to discuss insurance deals among themselves. Lloyd himself was not involved with insurance, but he provided a reliable place for these men to carry out their business of insuring ships. The insurance process began with members of the coffee house each taking a share of risk and then signing their names one beneath the other on a particular policy with the amount they agreed to cover. This process is what gave them the title they have today as "underwriters." The coffee houses provided a pleasant meeting place and their popularity as places for business transactions was quickly established in the City of London.

After the English Civil War, the growing importance of London as a centre of trade led to a steady increase in the demand for insurance of ships and cargoes. But business in those days was conducted very informally. Between 1688 and 1807, one of the primary sources of Lloyd's business was the insurance of ships engaged in slave trading, as Britain established itself as the chief slave trading power in the Atlantic. Slave trading became one of the primary constituents of all British trade, and its dangers meant that insurance of the ships was a major concern. At Lloyd's coffee house, and until his death in 1713, Lloyd encouraged a clientele of ships' captains, merchants, ship owners and others with an interest in overseas trade. So, at a time when communications were unreliable, Lloyd gained an enviable reputation for trustworthy shipping news. This was crucial to successful underwriting and ensured that 'Lloyd's' became recognised as the place for obtaining marine insurance. Society of Underwriters: Informal to Formal Throughout the 18th Century, the informal gathering of merchants at Lloyd's Coffee House gradually assumed a more cohesive identity. However, there was little to no restriction of activities and the professionalism of the group was mixed.

In 1769, a number of Lloyd's more reputable customers decided to break away and set up a rival establishment in nearby Popes Head Alley. This was one of the first signs of any community of interest among underwriters and led rapidly to the establishment of a properly constituted society. 'New Lloyd's Coffee House' as it was called, soon proved to be too small. So a committee was elected to find new premises. Some 79 underwriters and brokers each subscribed £100 towards a new premise. This brought about a new image for Lloyd's as they became known to the public as the property of subscribers. Furthermore, in 1774, rooms were leased in the Royal Exchange and 'New Lloyd's' left the coffee business for good. While still referred to as 'Lloyd's Coffee House' for many years, it was much more like a place of business. The modern Lloyd's had been born. Over the next century the society of underwriters at Lloyd's gradually evolved. Key Dates to be Noted Lloyd's history, developments, accomplishments, and downfalls stretch across time.

To see a full history and chronology of key dates related to Lloyd's of London follow this link to the Lloyd's of London site: The following will provide more in-depth information on key dates in Lloyd's History: The First Lloyd's Act, 1871 and 1911: As the society of underwriters at Lloyd's gradually evolved, membership became regulated and the elected Committee was given increased authority. This period culminated in 1871 with the incorporation of Lloyd's by Act of Parliament. The Lloyd's Act of 1871 gave the Society a formal legal basis allowing it to acquire property and make byelaws with the full authority of Parliament behind them. It confirmed Lloyd's as a business institution with guidelines that can be seen still working successfully today. The Lloyd's Act of 1911 set out the Society's objectives, which include the promotion of its members' interests and the collection and dissemination of information. The Cromer Report, 1968: The membership of the Society, which had been largely made up of market participants, was realized to be too small in relation to the market's capitalization and the risks that it was underwriting.

Lloyd's response was to commission a secret internal inquiry, known as the Cromer Report, which reported in 1968. This report advocated the widening of membership to non-market participants, including non-British subjects and women, and to reduce the onerous capitalization requirements (which created a more minor investor known as a 'mini-Name'). The Report also drew attention to the danger of conflicts of interest. Changes in the UK Financial Market: Beyond the Cromer report, many changes in the UK financial markets occurred that led up to the second Lloyd's Act. These changes included both new developments and several issues domestically and abroad. Developments include the new tax structure, and the increase in Lloyd's external membership. Issues domestically and abroad include the following: Firstly, in the United States, an ever-widening interpretation by the Courts of insurance coverage in relation to workers' compensation in relation to asbestos-related losses, which had the effect of creating a huge, and initially unrecognized and then unacknowledged hole in Lloyd's reserves. Secondly, by the end of the decade, almost all of the market agreements, such as the Joint Hull Agreement, which were effectively cartels mandating minimum terms, had been abandoned under pressure of competition.

Thirdly, new specialized policies had arisen which had the effect of concentrating risk: these included 'run off policies', under which the liability of previous underwriting years would be transferred, and 'Time and Distance' policies, whereby reserves would be used to buy a guarantee of future income. Second Lloyd's Act, 1982: In 1980, Sir Henry Fisher was commissioned by the Council of Lloyd's to produce the foundation for a new Lloyd's Act. The recommendations of his Report addressed the 'democratic deficit' and the lack of regulatory muscle. The Lloyd's Act of 1982 further redefined the structure of the business, and was designed to give the 'external Names', introduced in response to the Cromer Report, a say in the running of the business through a new governing Council. 1980's and 1990's Decline: In the late 1980s and early 1990s, Lloyd's went through the most traumatic period in its history. Unexpectedly, large legal awards in US courts for punitive damages led to large claims by insurers.

Also in the 1980s Lloyd's entered bankruptcy for 3 weeks and was accused of massive fraud by several American states and the names/investors. Some of the more high profile accusations include the following: Lloyd's withheld their knowledge of asbestosis and pollution claims until they could recruit more investors to take on these liabilities that were unknown to investors prior to investing in Lloyd's. Enforcement officials in 11 US states charged Lloyd's and some of its associates with various wrongs such as fraud and selling unregistered securities. Ian Posgate, one of Lloyd's leading underwriters was charged with skimming money from investors and trying to secretly buy a Swiss bank. He was later acquitted. What is Lloyd's? Lloyd's is the world's leading, specialist insurance market home to 47 managing agents and 72 syndicates. Lloyd's is not an insurance company but a society of members, both corporate and individual, who underwrite in syndicates on the behalf of professional underwriters accepting risk. (To underwrite means to assume the risk on a specific policy). They create a market of insurance companies who are then able to use the trusted and prestigious Lloyds of London name.

Supporting capital is provided by investment institutions, specialist investors, international insurance companies and individuals. How Lloyd's Operates Brokers come to the Lloyd's Building in London and "shop around," taking a particular risk they want covered around the market to try to find the best price, terms and conditions. The brokers negotiate with different insurance companies residing at Llyod's until they have insured 100% of the project they took on. At Lloyd's, businesses from all over the world can find insurance for risk exchange for the payment of a premium. This premium and the terms and conditions of the policy, are based on the likelihood of the risk happening and its value. If it's a big risk and worth a lot of money it is likely that you'll pay more to insure it. Together the syndicates underwriting at Lloyd's form one of the world's largest commercial insurers and a leading re-insurer. What Lloyd's Does The members of Lloyd's sell or underwrite insurance. The members provide the financial backing, known as capital, which acts as security for Lloyd's policies to help ensure that claims are paid. Capital comes from a mixture of financial institutions, major insurance businesses and individuals. These businesses or individuals are sometimes called 'Names'.

A member or group of members form a syndicate. A syndicate is a group of people or a firm who are authorized to undertake a task; they work together to reduce the risk involved with the undertaking. A syndicate's underwriting and other activities are managed on behalf of its members by a managing agent. For example, managing agents employ the underwriters who use their specialist knowledge to accept or decline risks for the syndicate. Different syndicates can specialize in different types of insurance. The market structure encourages innovation, speed and better value, making it attractive to policyholders and participants alike. Immediate access to decision-makers means that answers on whether a risk can be placed are made quickly, enabling the broker to provide fast, good value solutions. Why Lloyd's is Important Many ideas would never be possible without a way to reduce risk. We all know risk is unable to be eliminated; however, it can be managed and reduced. There are many insurance companies who price things like cars, houses and medical expenses which can be relatively easy to price with set methods and manuals. Lloyd's specializes in those risks that are hard to price, large and difficult to understand. There unique market focus helps to get good ideas off the ground that would normally be unfeasible.

Lloyds is a large part of all companies around the world insuring companies in over 200 territories worldwide. Also, 92% of FTSE 100 Companies and 93% of Dow Jones companies have insurance through Lloyd's while 8 of the worlds top pharmaceutical companies and 48 of the world's top banks use Lloyds. Who Works at Lloyd's Members - Also known as "Names", this group of people are the providers of capital. They generally are employed by large corporations and thus are subject to limited liability. Managing Agents - Underwriting agents who have permission from Lloyd's to manage a syndicate and carry on underwriting and other functions for the members. They generally oversee all of the syndicate's activities. Members' Agents - An underwriting agent appointed by a member to provide services and perform duties for the member. These may include advising the member on which syndicates he/she should join and talking with the managing agents on behalf of the member. Brokers - Also called the intermediaries, brokers are hired by outsiders and focus on trying to find the best deal among the syndicates for their employers. Examples of what Lloyd's Insures: Lloyds covers the most complex and specialist risks.

This can range anywhere from major airline companies, to celebrities voices or body parts, to oil rigs to some of the world's biggest banks. Olympics The Olympics can be considered one of the most difficult events to price. Many things can go wrong and the risks can be very unpredictable which can end up costing millions. The Olympics gave Lloyds a chance to showcase what they were capable of when they sent in teams of consultants to assess and advise on anti terrorist measures. Egon Ronay Food Critic Insured his tongue for $400,000 since his endorsement could end up costing restaurants millions. Legs Actress Betty Grable insured her legs for $1 million each. Entertainers Tina Turner as well as Brook Shields also insured body parts. Singers Bruce Springsteen, Bob Dylan and Rod Stewart all insured there voices to protect themselves from the day there voices no longer worked. Lloyd's also wrote an insurance policy for Celine Dion's vocal chords. Keith Richards, a famous guitarist and songwriter, insured his fingers. Other Jimmy Durante's nose, nicknamed: "Schnozzola", was also insured by Lloyds.

His nose was what helped make him one of America's popular personalities of the 1920s through the 1970s. Miscellaneous Sporting Events (Wimbledon, Ryder Cup & World Cup.) Why Lloyd's is Located in London • Initially Lloyd's was formed due to the enormous demand for ship and cargo insurance in the city. It was able to establish a clientele of ship owners, ships', captains, and merchants because of London's heavy trading population in the 17th. century. • Currently London is the top financial center across the globe. The London Stock Exchange is the worlds largest foreign exchange market with its daily turnover rate of $504 billion dollars, which is more then New York and Tokyo combined. It has been incontrol of over 80% of Europe's assets and 20% of the worlds investment fund assets which attracts the wealthiest investors. • London has the largest and most distinctive market located in the city. It is the largest market for over-the-counter derivatives as it is in control of 36% of global turnover and it manages almost 50% of Europes institutional equity capital.

The main market lists and trades equity and other securities used by over 1,600 companies from 60 countries. • London is the worlds largest banking center. There are over 550 international banks located in London. It holds more then 100 headquarters of the 500 largest European companies and 25% of the worlds leading financial companies. • Another reason that Lloyd's is located in London is because of its location with regards to time zones. Since Lloyd's is a global company they are able to get in contact with multiple countries in the same work day if they need to. • Lastly, London has the availability of skilled personnel which is critically important in determining business location. London is one of the few cities with the availability of high quality personnel. By enhancing their professional standards they are able to maintain their competitive advantage over other industries and attract new talent. How Lloyds Contributes to London being a Financial Centre Language and Geographic Location English is widely accepted as the language of business and London's primary language is English. Lloyd's location allows them to do business with the far east in the morning and the United States in the afternoon. The United States accounts for £10 billion of profit each year Lloyd's.

Revenues and Profits for Insurance Companies in London London is the world's largest international insurance market with gross premium income of £24.6 billion in 2002. Lloyd's reported a profit of £3.7 billion in 2006. Potential Capacity Lloyd's has increased its capacity to £16.1 billion in 2007, an increase of 9% in one year. The largest syndicate of Lloyd's is Catlin which provided an estimated capacity of £1.1 billion in 2007. Catlin accounts for 6.8% of Lloyd's market share. Types of Investors in Lloyd's • 123 corporate members (private companies) • 1,124 individual members with unlimited liability ("Names"), only 30 years ago this number was above 30,000 members. They do not allow new members to invest with unlimited liability.

• 467 NameCos (individuals underwriting via limited liability companies) • 131 Scottish Limited Partnerships (individuals underwriting via limited liability partnerships) • 3 Group Conversion Vehicles (individuals who converted into limited liability group schemes) • 294 Limited Liability Partnerships (individuals underwriting via limited liability partnerships) Total of 2,142 different investors Three Year Plan (2008-2010) CEO Richard Ward developed a three year plan to keep Lloyd's on track with future projections The Three Year Plan is Made up of five parts: Performance Framework Operating Environment Performance Framework • Better monitoring of market performance and benchmarking of managing agents across a number of key performance indicators, through the enhancement of internal analysis tools Capital Advantage • Reviewing syndicates of Lloyd's more thoroughly including performance and other characteristics Security and Ratings • Ratings remain at the desired level, further enhancing Lloyd's reputation as a secure and stable market to place (re)insurance business Market Access • Improved support for Lloyd's Asia platform • Further development of multiplatform model • Lloyd's presence at key international and regional insurance hubs, allowing managing agents to retain/increase access to business flows Operating Environment • Significant change in market culture to recognise and support new

 business models • Lloyd's operations appear like any other insurance market to brokers and customers Lloyd's Building !EBW_Exteriorofbuilding2<span class=|width=32,height=32!

1 .JPG|thumbnail"/> The architecture of Lloyd's is no doubt very unique. It was designed by Richard Rogers and was innovative in the sense that its staircases, lifts, power conduits, and water pipes are all on the outside, leaving the inside area free of clutter. In addition to that, lifts and escalators are all see through, and the 12 see through lifts that Lloyds has were the first of its kind in the UK. The focal point of Lloyds is the large underwriting room on the main floor, surrounded by 3 main towers and 3 service towers. The underwriting room is famous for housing the Lutine Bell, which is a famous bell discovered at the bottom of a sunken ship. The bell hangs in the center of the room and was originally used to alert brokers and underwriters of news, such as the arrival or loss of a ship. Now, after developing a crack, the bell is no longer used for its traditional purposes, but is used instead to alert brokers and underwriters when a member of The Royal Family dies, or to commemorate disasters such as 9/11 or the Tsunami. !inside Lloyds|width=32,height=32!

!Inside Lloyds 2|width=32,height=32! No labels LLOYDS OF LONDON'S BIG LOSERS - The Washington Post LLOYDS OF LONDON'S BIG LOSERS The inside track on Washington politics. Be the first to know about new stories from PowerPost. Sign up to follow, and we’ll e-mail you free updates as they’re published. You’ll receive free e-mail news updates each time a new story is published. You’re all set! Got it By Benjamin Weiser June 17, 1994 NEW YORK, JUNE 16 -- Supreme Court nominee Stephen G. Breyer says he may suffer losses of more than $114,000 in the battered Lloyds of London insurance market. If that's true, he will be one of the lucky ones. Breyer is among the 2,500 American investors, or "names" as they are called in London, who joined Lloyds in the last two decades to underwrite insurance policies covering everything from the routine to some of the world's most exotic and risky endeavors.

They have now become enmeshed in Britain's greatest insurance disaster, which has brought thousands of wealthy investors on both sides of the Atlantic to the brink of financial ruin. While Breyer, whose net worth exceeds $8.5 million and whose insurance will cover his losses up to $188,975, does not appear to have major concerns, other American "names" are facing the loss of their homes and their legal estates. "There's going to be 200 to 400 names in this country who are literally bankrupted," said William McIntyre, who runs a Dallas insurance company. McIntyre has had "significant" losses, he said, high enough that he didn't want to disclose them for the record because he hadn't told his wife. "It's inconceivable how much money smart business people have lost," McIntyre said. "It's pretty embarrassing." In the District, Richard Scully, a 70-year-old retired tax attorney, said he already has paid Lloyds $140,000 and has been told he will owe an additional $500,000 to cover underwriting losses.

He is applying to a special Lloyds hardship program that will require him to deed over his house to Lloyds after he and his wife die. They had hoped to leave the house to their children. "I feel pretty damn mad," he said. With many American "names" contending that they were not adequately warned by Lloyds about the extent of their risk, the American Names Association is announcing today that it will sue Lloyds in U.S. courts, alleging fraud and violations of U.S. securities laws. American names have a special complaint: that they were steered into the riskiest insurance syndicates by Lloyds in part to divert some risk from British names. Lloyds officials reject all the allegations from American and British names, including their common complaint that Lloyds hid information about underwriting risks when they joined as investors. "It was never compulsory to join; they joined of their own free will," said Lloyds spokesman Nick Doak.

"I always thought that if you were going into something -- and were told that you were liable for everything you owned -- you would take a great deal of care before you jumped in." Lloyds has arranged to have its chief executive, Peter Middleton, address American names and answer questions next Tuesday in a closed-circuit video conference broadcast from London. The American Names Association's newsletter being mailed today proclaims, "At last -- American justice for American names," a reference to the fact that the British Parliament has made it almost impossible to recover damages against Lloyds in the British courts. "This is the Revolutionary War all over again; there are groups forming all over the country," said one angry midwestern name with $250,000 in losses. "My continuing participation in Lloyds is probably one of the stupidest things I have ever done," he said, requesting anonymity. He said he had encouraged more than a dozen family members and friends to join Lloyds; collectively, they face losses exceeding $3 million. "We are helping to organize everywhere we can," the executive said. "We feel we owe these people our best efforts to get them out." In St.

Michaels, Md., Neville and Sally Williams, both 55, said they have paid Lloyds more than $1 million to cover losses -- and can't pay any more, even though they expect Lloyds to come after them for an additional $2 million. "It's terrifying," said Sally Williams, a former nurse. "I feel panic every time the mail comes." For most of its 306-year history, Lloyds paid fairly regular returns to investors and became renowned for its willingness to insure everything from Betty Grable's legs to the Titanic. Its investors included members of royalty and Parliament, and other celebrities. In the past four years, however, Lloyds has reported record losses of $11.3 billion. To meet these obligations, it had to ask its names for cash. Lloyds officials blamed the losses on "a high incidence of catastrophes" and continued exposure to asbestos and pollution claims. A number of Lloyds defenders, including some in the United States, support this position.

"The extreme element would say, 'They're all a bunch of crooks and they defrauded me,' " said Edward Palmer, a retired Citibank official who was asked by Lloyds to chair an advisory panel of American names. "The facts are that Lloyds, like all insurers, was badly treated by circumstances. "Some names with huge losses are trying to find every way to blame everybody else so that they don't have to pay their liabilities," Palmer said. "It's understandable. It's a natural thing for people to use every means they can to protect themselves." For many Americans, first allowed to join in 1970, Lloyds was seen as a relatively safe investment conferring status and prestige. "You could talk about being a 'Lloyds name.' It was good conversation. It was the trendy thing to do," said Ben Bailar, a former postmaster general and today dean of the graduate school of administration at Rice University. "They had a long record of success, and basically for putting up your credit you got a check every year." Bailar has shown a modest profit as a Lloyds name.

Names had to pledge all of their assets -- "down to their last cuff link," as names like to put it -- and accept unlimited liability for losses. There was, of course, the potential for enormous returns. Some names are partly covered by insurance. In documents submitted to the Senate Judiciary Committee, Breyer said he is insured for losses up to $188,975. Breyer said he resigned as a name in 1988 but remains at risk for one 1985 syndicate that has not yet "closed." A "conservative" projection is an overall loss of about $114,000 but "at this time" the actual amount "cannot be reasonably estimated," he told the committee. Other U.S. names said they did not buy such insurance or found it was not available to them. Despite requests by some American names that the Securities and Exchange Commission investigate whether Lloyds violated any U.S. securities laws, the SEC has not publicly indicated any interest in such a probe. SEC officials declined comment.

Richard Rosenblatt, head of the 530-member American Names Association, said the lawsuit will attack Lloyds's requirement that American names sue Lloyds only in London. As a result of this rule, several earlier suits in the United States have been thrown out by the courts. Meanwhile, as they await new cash demands from Lloyds, many American names fear real financial collapse. Washington Heights, N.Y., resident Constantine Salonitis, a 55-year-old shipping employee, said he has paid $225,000 and faces more demands from Lloyds for at least $850,000, which he has no way to pay. Much of the money he invested was borrowed from relatives and friends. "I feel shame because I was really dragged into this," he said. "For the years to come -- if there are many -- I will have to suffer with that." politics Demystifying Lloyd's of London | PropertyCasualty360 Demystifying Lloyd's of London Share This Story Lloyd's earliest home: Edward Lloyd's coffee house on Tower Street in London. Alex Ferguson is a London-based freelance journalist with many years of experience covering the insurance industry in general and Lloyd’s in particular.

While everyone in the U.S. insurance space knows the Lloyd’s of London name—indeed, it’s one of the world’s oldest and best-known corporate brands—this awareness by no means translates into understanding—or business. A large swathe of U.S. producers have never engaged with Lloyd’s on the (often incorrect) assumption that it’s not a good fit for their placements. Here are five commonly held misperceptions among U.S. producers about Lloyd’s. The reality might not only be surprising—it could prompt more to look to London as a possible home for their clients’ risks. Myth #1: Lloyd’s is an insurance company Reality: “Lloyds is not an insurance company like CNA, Chubb or Travelers,” says Hank Watkins, president of Lloyd’s USA.

“Lloyd’s is a 325-year-old insurance marketplace, comprised today of 57 managing agents running 87 syndicates, where underwriters provide a wide range of specialty insurance products to brokers working on behalf of their clients.” From its London headquarters, Watkins adds: “Lloyd’s offers global licenses, A or better ratings, promotional and regulatory support and performance oversight, all supported by a $4.8 billion Central Fund [which] is available to pay the claims of any syndicate impacted by adverse claim activity.” This Central Fund, to which every Lloyd’s member makes an annual contribution, is accessed at the discretion of the Council of Lloyd's to meet any valid claim that cannot be met by the resources of any member. The fund has played a crucial role in repairing Lloyd’s reputation, which was severely tarnished following massive losses in the late 1980s and early 1990s related to asbestos and pollution claims. Watkins says that while brokers who’ve done business at Lloyd’s over the years are aware of its unique aspects, those who haven’t—and there are many in the small and midsized segment—often incorrectly conceive of as Lloyd’s as a classic insurance carrier. Misconception No.

2: Lloyd’s only handles oversized and extreme risks Reality: According to Mary Hughes, president of construction and energy at Lloyd’s underwriter ProSight Specialty Insurance, “there is a commonly held belief that Lloyd’s syndicates only insure very large or highly unusual types of risks,” such as offshore oil rigs or celebrity body parts. In fact, notes David Wheal, managing director of North America for RFIB, a leading Lloyd’s broker: “While Lloyd’s can and does handle the more specialist risks, there is a strong appetite for mainstream business, albeit with an E&S flavor—that is where wind, quake, flood, hail, etc. are the significant perils. Without doubt, Lloyd’s underwriters are way ahead of the curve when it comes to assessing and managing catastrophe exposures.” When accessing Lloyd’s, Hughes cautions: “From an Excess standpoint, the U.S. underwriter needs to understand and evaluate how the definitions, exclusions and conditions [in the Lloyd’s form] will interact with the primary policy form.

Areas of concern center around: application of limits and any potential sublimited coverages that could present a drop down exposure; exclusionary language, for example, asbestos or pollution; and definitions, for example, ‘occurrence,’ ‘bodily injury’ and ‘pollution.’” Hughes advises that these concerns can be addressed via utilizing a follow-form policy vs. a true umbrella form (assuming that the language in the primary policy form is acceptable). She also thinks that it’s important to craft language that “either dovetails with the primary policy form or addresses any areas of concern.” Misconception No. 3: Lloyd’s only handles reinsurance Reality: Lloyd’s is indeed a major player in reinsurance, but globally, it accounts for only 38 percent of its total business, according to Lloyd’s 2012 annual report (and just 27 percent of its business in the U.S. and Canada). Misconception No. 4: Lloyd’s is a small player in the U.S. Reality: This is a major misconception as the U.S. (and Canada) account for the plurality of Lloyd’s global business: 41 percent vs. 33 percent for the U.K.

(18 percent) and Europe (15 percent) combined. And Lloyd’s U.S. operation grew by $350 million in 2012, according to Watkins, thanks to both rate increases and an increase in new business. In 2012, Lloyd’s members wrote $6.27 billion of E&S business in the U.S. and $4.92 billion of reinsurance business. Its E&S business alone would make Lloyd’s the 14th-largest insurance player in the U.S. were its syndicates considered a single group, according to PC360’s annual ranking of the Top 100 Insurers . Misconception No. 5: Lloyd’s will take any risk Reality: “One of the misconceptions about Lloyd’s is that it will write anything,” notes RFIB’s Wheal. “The specialist nature of the Lloyd’s market means that, more often than not, cover can be provided, particularly for types of risk that others are unwilling or unable to write.

However, this does not necessarily mean that every conceivable risk can be underwritten at Lloyd’s.” Some additional Lowdown on Lloyd’s: Among industry types that Lloyd’s syndicates currently are targeting, according to Watkins: healthcare, health sciences, traditional and alternative energy, petrochemical and agriculture. Pension and hedge funds are gravitating towards Lloyd’s syndicates in an effort to take advantage of the considerable risk management skills of these underwriters. Watkins said non-traditional provision of funds would help to take insurance and reinsurance capacity to a new high of $500 billion by year-end, if a mega-catastrophe (something far bigger than Hurricane Sandy) does not strike. The Lloyd’s underwriter’s knowledge, Watkins says, is the most important part of the Lloyd’s package. “By virtue of the fact that a Lloyd’s underwriter reviews submissions from every corner of the world, every day, a unique ability to rapidly assess and apply the syndicate’s capacity toward a wide range of risks is developed early on one’s career,” he says. “While underwriters may move between syndicates over the course of a career, they tend to remain underwriters, often in the class of insurance or reinsurance they were initially trained in.

The outcome is the development of expertise and long-term relationships with brokers and policyholders that are unmatched in the general insurance industry.” Lloyd's Names face bankruptcy as court battle ends - Telegraph Insurance Lloyd's Names face bankruptcy as court battle ends More than 30 Lloyd's of London "Names" will reach the end of a long legal battle when they are declared bankrupt in the High Court on Friday. The Names have since spent years battling against Lloyd's in the courts but the High Court ruled against them in July, a decision which was upheld by the Court of Appeal four months ago Photo: JUSTIN THOMAS By Jamie Dunkley, Insurance Correspondent 9:30PM BST 04 Jun 2009 The group of 35 individuals face financial ruin just under a year after the Court ruled against their claim that they had been misled over insurance deals they bought into prior to the market's near collapse in 1992.

Their case, which will reach its final chapter in the Bankruptcy Court on Friday morning, began in 1996 when the world's largest insurance market tried to collect money owed by the Names – private individuals who agreed to take on the liabilities associated with insurance risks in return for any profits made from premiums – to cover very heavy losses incurred on asbestosis-related claims. Although most of the Names paid up and agreed to a scheme to reinsure their debt, 1,200 refused. About 200 of this second group responded by launching a counter-suit for compensation, which claimed that Lloyd's brochures had led them to believe that the cover, called Reinsurance To Close (RITC), completely ended their liabilities at the end of each underwriting year. The Names have since spent years battling against Lloyd's in the courts but the High Court ruled against them in July, a decision which was upheld by the Court of Appeal four months ago. Sean McGovern, Lloyd's general counsel, said the ruling would help the market "close a chapter in our history".

However, speaking on Thursday, Christopher Stockwell, chairman of the Lloyd's Names Association, who was himself bankrupted in 1994 after the losses suffered in the insurance market, said the court case had been "devastating" for those involved. "Many of the people involved in this court battle have died and others are now elderly," he said. "After today, we hope this torment will be over for those affected, meaning they are free to get on with their lives." The bankruptcy hearing comes ahead of a separate court hearing on June 24, that would see Equitas, the vehicle set up to manage those liabilities that almost destroyed the Lloyd's market, transfer the last of its pre-1993 liabilities to a new company and boost its reinsurance coverage through Berkshire Hathaway. Since Equitas was formed it has paid out almost $30bn in claims.

Hugh Stevenson, Equitas chairman, said: "This transfer and reinsurance will secure the position of the policyholders and mean that the Names will finally be able to walk away under English law." How to become a Lloyd's Name – Capital and Conflict How to become a Lloyd's Name 20th March 2009 How to become a Lloyd's Name Buying into the world’s leading specialist insurance market is a risky business – and you need a big initial investment. But the rewards can be highly lucrative. David Stevenson reports. Got a spare £600,000? You might want to consider investing in Lloyd’s. Not the troubled high-street bank – heaven forbid. We’re talking about Lloyd’s of London. So how does it work and why would you be interested? Officially a society, rather than a company, Lloyd’s is the world’s leading specialist insurance market, the ‘go to’ cover provider for the most complex and extreme risks around. More than 90% of Dow Jones Industrial Average companies and the same proportion of FTSE 100 firms buy cover at Lloyd’s. The market also knows more than anyone else about what’s happening in world shipping.

Set up in Edward Lloyd’s coffee house in 1688 – predating the Bank of England by six years – the market now accounts for half of all international insurance premiums underwritten in London. The Lloyd’s market is currently made up of 51 managing agents who run 87 insurance syndicates. These are funded by corporate groups such as investment firms and international insurers, and also by individual members, otherwise known as Names. The basic principles are simple. Lloyd’s brokers drum up business from clients, other brokers and intermediaries around the world. They bring this to the professional underwriters employed by the syndicates. These underwriters then decide what risks to take on and at what price (in other words, what premiums they’ll charge). In return for this income, the Names stand toe to toe with the market’s corporate capital backers in covering the liabilities agreed by their underwriters. What does Lloyd’s insure? Becoming a Name can earn you good money. But make no mistake. As Neil Smith of managing agent Hampden Agencies emphasises, “this is definitely a ‘risk’ investment”.

What ratchets up the risk is Lloyd’s particular specialisation – reinsurance – which accounts for a third of all business carried out in its market. Reinsurance is used to protect against large claims. Insurers providing cover against a fire destroying a large oil refinery, for example, will want to cap their own potential exposure in the event of a full-scale disaster. So they’ll reinsure part of the liabilities they’ve agreed to cover with other insurers, meaning they’ll pass on some of the risk in return for a proportion of the premium. This helps insurers to balance out their underwriting results each year without too many peaks and troughs. They can also widen their international risk spread, vital when an insurer is heavily committed to a country that’s vulnerable to natural disasters. For Lloyd’s, reinsurance can be very lucrative. But because of the types of cover provided, it can also be very risky. So it’s not always been plain sailing for the market or its members. Historically, Names had unlimited liability to the risks they were underwriting. In the late 1980s/early 1990s, Lloyd’s entered the most traumatic time in its history.

Unexpectedly large legal awards in US courts on asbestos, pollution and health hazard policies (APH) served up huge losses to many Names, a large number of whom lost their shirts. Names’ numbers dropped from over 30,000 to below 10,000. Lloyd’s went through the pain barrier to sort out the problem. In 1996, all pre-1993 liabilities were split out into Equitas, a ‘run-off’ fund that could only settle existing claims but not write any new business. Still-solvent existing members agreed to pony up £15bn to meet potential APH claims over the next 40 years. Then Warren Buffett’s Berkshire Hathaway took over Equitas’s liabilities in 2006. Despite widespread individual woes, Lloyd’s proud boast is that it has never failed to pay a claim. Should you become a Lloyd’s Name? Today, Lloyd’s is a very different animal. “The Lloyd’s market is now clean,” says Smith, “there are no ‘back year’ liabilities.” Control is much tighter due to a mix of self-regulation and external monitoring by the Financial Services Authority (FSA).

Prior to writing any business, all syndicates must produce an underwriting plan for approval by the Lloyd’s Franchise Directorate. Further, each syndicate will insure several different risk levels with a spread of claim likelihoods, and must put up capital based on the risk coding of the business written. Reserves against future claims are much higher these days – many syndicates often have reserves of between 300% and 400% of their liability book. But the real key is that limited liability has now been brought in to protect Names and ensure there’s no repeat of the APH horrors. So what are the pros and cons of becoming a Name now? Unless you can put up a minimum of £600,000 (£400,000 capital plus the £200,000 cost of buying into a syndicate), this isn’t for you. And we’re talking here about liquid assets, such as cash, shares, gilts, letters of credit or bank guarantees, all of which could be realised quickly if necessary. What’s more, you have to keep your capital level topped up.

If you were to drop, say, £150,000 in a bad year, you’d need to rustle up that amount on top of your original £400,000 investment. Then there’s the cost of buying into a syndicate – your equity stake, if you like. At current prices, that’s likely to cost you in the region of a further £200,000, although you could eventually make a profit on that. The underwriting cycle If you’re not scared off by risking what, even these days, is a fairly chunky sum of money – and remember, you could theoretically lose every penny, although that’s unlikely – becoming a Lloyd’s Name could turn out to be a very worthwhile long-term investment. The market can be highly volatile, but there’s a low correlation between Lloyd’s returns and assets such as shares or property. That’s because Lloyd’s profits move in line not with the economy, but with underwriting cycles, which are driven by how much capital is in the market. When syndicates’ profits rise, more capital flows in, premiums drop (a soft market) and underwriters make less money.

So they cut back their business, rates tighten up (hard market) and profits rise again. Peak to trough, the cycle tends to last five to seven years. There are several other benefits. Your capital remains yours. The £400,000 capital must be lodged with Lloyd’s, which becomes trustee and has first charge over your assets. But you continue to receive all dividends and interest. So you get double use of your assets. Further, your capital is leveraged – as a Name you may underwrite up to 2.5 times your funds at Lloyd’s. And because of Names’ limited liability status, there may be other tax, pension and estate-planning advantages too, says Hampden Agencies, but clearly these depend on individual circumstances. How much might you expect to make? As we have explained, there are no guarantees. Lloyd’s operates a 36-month accounting system to allow for ongoing claims. This means that the results for any one year are only finalised 24 months after year-end, and enables the ultimate returns to be smoothed out. On top of the published returns, syndicates like to tuck a little away into reserves for a rainy day.

Bearing that in mind, below is a table of underwriting returns achieved by clients of Hampden Agencies since 2001, showing the actual returns on capital Names have made. Returns made by Name clients of Hampden Year

Question: What are Lloyds of London’s syndicate members more commonly called
Answer: Names